Canada Inflation

Canada: Inflation eases in December

January 23, 2015

In December, consumer prices fell a seasonally-adjusted 0.1% over the previous month, which followed the 0.2% decrease recorded in November. According to Statistics Canada, lower prices were recorded in four of the eight major components of the index, with the largest price decrease recorded in the index for transportation.

Annual headline inflation fell from 2.0% in November to 1.5% in December, thus recording the lowest rate in 10 months. The figure met market expectations. According to Statistics Canada, the decrease was largely due to falling gasoline prices. Inflation is well anchored within the Central Bank’s tolerance margin of plus/minus 1.0 percentage points around its target of 2.0%. Annual average inflation was stable at November’s 1.9% in December, which had represented a 26-month high. Annual core inflation, which excludes volatile items such as gasoline and fresh food, inched up from 2.1% in November to 2.2% in December.

According to its October Monetary Policy Report, the Bank of Canada expects headline inflation to average 1.6% in 2015. FocusEconomics Consensus Forecast panelists expect inflation to average 2.0% in 2015, which is unchanged from the previous month’s forecast. The panel expects inflation to also average 2.0% in 2016.

On 1 October, after more than a year of tense negotiations, Canada and the United States agreed to maintain their longtime free-trade relationship, seemingly ending an uneasy chapter of neighborly brinkmanship that, only months ago, had threatened to upend the continent’s trading landscape.

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